India Considers GST on Trading of Cryptocurrencies
India considers levying 18 percent GST on trading of digital currencies, at a time when there’s no clarity about the legal status of cryptocurrencies in the country.
According to the report published by Bloomberg on May 23, the information was revealed by people directly related to the matter. India’s Central Board of Indirect Taxes and Customs is currently considering the proposal, which after getting approved, will be tabled before the Goods and Services Tax Council.
India has neither banned cryptocurrency, nor legalized it, but the government of India has, on many occasions, warned the public about the risks involved in crypto trading.
According to the proposal, cryptocurrencies are subject to GST as they are considered ‘supply of goods’. Meanwhile, those that facilitate these crypto-transactions, like accounting, storage, supply, and transfer should be considered ‘services’, and should therefore be taxed.
Moreover, if buyers and sellers conduct the transaction in India, the transaction would be considered a supply of software, and the location of buyer would be treated as the place of supply. And transactions beyond the geographical boundaries of India would be liable for integrated goods and services tax and would be treated as import and export of goods. The value of digital currencies may be determined on the transaction value in Indian rupees or the equivalent in any foreign currency that’s freely convertible.
The sources added that the government has not made any decision so far, but could consider levying the new tax as soon as July 1 this year.
Treating digital currencies as goods and services can potentially make taxation simpler, according to Bloomberg. To tax digital currencies as a currency or security would be much harder as it would require the government to change some laws, indirect tax partner at EY told Bloomberg. But to tax digital currencies, the government would only have to issue a circular, he added.